Recession is likely: Prof Arun Kumar on demonetisation -Governance Now

Recession is likely: Prof Arun Kumar on demonetisation

“The slowdown in demand will last for 1-2 years. Money supply will not be restored for another 7-8 months.”

Jasleen Kaur | November 22, 2016 | New Delhi

#recession #Demonetisation #scrapped currency #black money

Demonetisation is not the way to tackle black economy and it will in fact affect the white economy, believes Arun Kumar, a former professor of economics at the Jawaharlal Nehru University (JNU) who has authored The Black Economy in India (Penguin, 1999).

Kumar says that the common people are adversely affected. And as demand falls, production falls and this would ultimately result in fall of employment. “This will affect people at large. And the slowdown in demand will last for 1-2 years. Money supply will not be restored for another 7-8 months. Because of this difficulty in circulation, the demand will slow down for the coming 8-10 months. And therefore recession is very likely.”

He also adds that the move is affecting agriculture, industry and services. Black money would be just 1-2 percent of the total money and and most of this money would also be recycled. “So if you are able to demobilise this income, this would hardly create any difference,” he adds.

Kumar says, “Black income is generated through a variety of means – in spurious drugs, in under or over invoicing in trade and business. There are as many ways of generating black income as there are number of sectors in the economy. So even if you are able to demobilise some amount of black money this year, it would be again generated next year.”

Instead of going for demonetisation, Kumar adds, that the government could have tracked the hawala houses, ended banking secrecy and formed the Lokpal to bring in accountability. He also says demonetisation of currency will not tackle the black economy problem and will just hurt the white economy and small traders and workers.

“If this could have solved the black economy problem, then it does not matter even if we have to suffer some pain. If it is not solving the problem and causing a lot of problem to people who are innocent or workers who are not generating black income, then why do it?”

Comments

Other News

Testing the teachers, moving the goalposts

A teacher was appointed in 1999, before the Right to Education (RTE) Act came into force, and appointed under the rules that existed at that time. She gave the necessary test, passed it, passed the interview, and was appointed. Over the next 26 years, she taught thousands of children, faced transfer orde

`Focus on infra, reforms, digital connectivity has created strong foundation for growth`

In a step towards the operationalisation of the Bharat Audyogik Vikas Yojana (BHAVYA), union minister of commerce & industry Piyush Goyal launched the BHAVYA Portal on Monday in New Delhi. Addressing the gathering, Goyal said that the BHAVYA scheme will adopt a competit

Govt, RBI announce major reforms to attract FPI

The finance ministry on Friday announced a series of measures aimed at enhancing the ease of investment for individual Persons Resident Outside India (PROIs) and Foreign Portfolio Investors (FPIs), and to attract stable long-term foreign capital flows. Building on the recent in

Lessons in climate adaption from world’s largest inhabited river island

Majuli Island, perched between the Brahmaputra River to the south and east, the Subansiri River to the west, and a branch of the Brahmaputra to the north, has been severely affected by recurrent flooding and intense riverbank erosion. Despite its global importance in acquiring UNESCO tentative status for

Careless whispers and the impossible trinity

Time can never mend, the careless whispers of … As the RBI marches ahead, for the upcoming monetary policy meeting this June, whispers from the corridors echo around several policy options to defend the rupee – by deploying forex reserves, raising in

Bullet Train Project: Third mountain tunnel breakthrough achieved

A major engineering milestone has been achieved in the Mumbai–Ahmedabad Bullet Train Project with the successful breakthrough of the third mountain tunnel (MT-07) at Ambesari village in Dahanu Taluka of Palghar district, Maharashtra. With this achievement, three mountain